High touch combined with high tech is the future for wealth management advisory services

Source: SciVantage

SciVantage®, a Global FinTech 100 technology provider of information-enabled software dedicated to transforming complex information and processes into intuitive user experiences for the financial services industry, and Aite Group, an independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry, announced today the release of its latest report, “The Race to Easy: Reevaluating the Wealth Management Technology Strategy.”

The paper, commissioned by Scivantage, focuses on the critical need for full-service wealth management firms to invest in technology in order to meet the needs of young investors.

“The emergence of Gen X and Gen Y investors requires firms to launch new service models that blend high-tech and advisor service,” said Sophie Schmitt, Senior Analyst, Wealth Management at Aite Group. “Evaluating how digital technologies complement and enable existing advisor services should be a priority for firms to ensure they remain competitive over the long-term while they continue to meet the needs of existing clients who now expect self-service tools and digital access to their wealth management information.”

The changing profile of today’s investor is driving the business strategies of traditional wealth management firms. However, according to the Aite Group report, the majority of today’s financial advisors are underprepared to deliver the digital experiences that investors need and expect, The adoption of mobile and tablet devices for accessing and managing personal finances is increasing steadily across all generations, and as a result advisors need to prioritize IT advancements that contribute to business goals and objectives.

In 2014, 72% of wealth management technology executives cited improvement of client experience as a first or second priority in their decision to implement digital solutions, followed by 47% who look to retain and/or attract advisors to the firm. These points are further supported by the following digital trends among wealth management firms:

55% of advisors indicate that they have a website, and within a few years, this percentage is expected to reach 70-80%, as advisors recognize the importance of this type of platform for attracting younger clients
58% of advisors recognize the importance of effective digital communications for acquiring Generation X and Y clients
Over 40% of advisors recognize the importance of providing digital self-service tools to young clients that offer a combination of high tech and high touch service
23% of Generation Y households and 20% of Generation X households leverage online personal financial management sites, compared to only 9% of boomers

While younger generations are more likely to tap into digital tools to build their financial knowledge base and access their investment portfolios, the baby boomer generation considers traditional investment firms and financial advisors as their primary source of support. According to the report, nearly 60% of boomers receive help from a traditional investment firm or financial advisor, compared to only 27% of Generation Y investors.

“This disparity in advisory preferences highlights the crucial need for firms to prioritize investment in their financial advice platforms with an eye on millennials,” said Chris Psaltos, Vice President, Product Management at Scivantage. “While the role of financial advisors is changing rapidly, they are far from being obsolete. Rather, firms must expand their offerings by introducing more digital touch points - such as robo-advisory and collaboration tools, which are taking on an increased role for today’s investors - in order to ensure that they remain competitive in not only today’s market, but into the future.”

Overall, client-facing technology is considered most valuable to investors when delivered alongside an advisor, as the combination of targeted advice and personal control brings optimal value to the process of managing one’s finances. “As firms initiate projects in digital wealth management, they must first understand how new technology can be applied to better meet clients’ financial needs,” said Psaltos. “While technology adoption between younger and older generations varies, the underlying takeaway is that investors across generations have a need for financial planning, and the wealth management firm of the future should be equipped to respond to this with a combination of high touch and high tech solutions.” According to the report, close to 60% of boomers view a financial plan as a top three unmet need, while younger generations state that having access to better financial management technology is one of their top five financial priorities, as current solutions are not meeting their needs.

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